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Uganda’s Oil Opportunity

Uganda’s recent oil discovery has the chance to reshape relations with its neighbours and the West as energy multinationals eye potential opportunities.

The Great Rift Valley of East Africa - the birthplace of humankind - holds a reservoir of billions of barrels of untapped oil. Over the last four years, UK-based oil exploration and production company Tullow Oil has discovered reserves of nearly 2 billion barrels of oil in rural western Uganda, with the largest finds in the Lake Albert Basin.

In what is now being called the largest onshore oil discovery in sub-Saharan Africa in 20 years, Tullow believes that this drilling area will yield “several billion” barrels of oil; and at least 15 major strikes by various oil companies have been made throughout Great Rift Valley since Tullow’s discovery.

Now as with any new resource discovery, especially on the African continent, and especially when it involves a private company from a former colonial power, questions begin to emerge about the host country’s negotiating power and the regional and international relations implications of the find.

Uganda is now at this point: It is a potentially new wealthy oil state, landlocked by its neighbors who are watching enviously as petro dollars promise to double Ugandan state revenues. The country is also being eyed by other international actors who wonder how oil might shape relations that were once based primarily on non-energy trade, the country’s captive labor pool and military training exercises with Ugandans as a part of a larger strategy to thwart terrorism in Horn of Africa.

Uganda’s oil discovery is also being compared to what is often cited as the Nigerian “petroleum curse” in which “billions of pounds in oil revenues [are] siphoned off by corrupt leaders while communities in the environmentally scarred, oil-producing regions still live in poverty.”

Still, others have identified the ongoing employment of Ugandans as private security contractors, trained and shipped off to Iraq by western private military and security companies, as a security advantage for Uganda. Their training in Iraq could come in handy on the front line of security for Uganda’s new oil infrastructure.

Securing the future

Uganda is in the same neck of the woods as the US military’s Africa Command (AFRICOM) regional military support apparatus. Furthermore, there are several EU energy and oil extraction projects throughout East Africa.

“One interesting dynamic is that while Uganda’s political risk will increase, western states will have less say in Uganda matters. In the medium term, once oil production starts, dependence on donor money will fall. Uganda will still need significant financing to build its oil infrastructure, both physical (refinery, pipeline, railway construction or rehabilitation) and institutional. But one should expect that there will be support forthcoming from non-western partners such as China, Iran, India, etc,” independent country risk analyst and publisher of www.ratio-magazine.com, Andrea Bohnstedt told ISN Security Watch.

“If Uganda takes this, it won’t need the West; if the West tries to muscle out those regimes, it can’t put conditions on its assistance. Remember what was seen in Chad where the West financed the pipeline, and tried to impose certain conditions on the government in return: They had limited impact, and when the president was under threat from rebel armies advancing on the capital, he basically threw all those restrictions out and did what he wanted and/or needed to do to save the regime,” he said.

While AFRICOM has security and economic interests in Uganda, for the time being, Bohnstedt said, “the largest African oil producers are Libya, Nigeria, Angola, Equatorial Guinea - and it’s not clear if Uganda will get anywhere near them in terms of reserves, and it’s still too fragmented to become a ‘hot oil region.’”

“Domestic security [in Uganda] will be closely related to political risk. Many Ugandans are fed up with [President] Museveni’s seemingly interminable rule (and all the contracts and business opportunities going to his family and entourage), and no longer think that they can achieve a change of government through the ballot box. That Uganda will be an oil producer just ups the stakes in the political contest,” Bohnstedt concluded.

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